Kentucky Investment Adviser Bond Guide
If you are working as an investment adviser in Kentucky, you'll need to purchase a surety bond. Read on to learn all about the bonding process.
Bond Overview
- Purpose: To hold advisers financially liable for following the Kentucky Securities Act provisions
- Who Needs It: All investment advisers working in Kentucky
- Regulating Body: The Kentucky Department of Financial Institutions
- Required Coverage: $10,000–$100,000, based on authority over client funds
- Premium Rates: Start at 1.5% of the bond amount, credit-based
How much does a Kentucky investment adviser bond cost?
The Kentucky Department of Financial Institutions requires investment advisers to post surety bonds before becoming legally licensed. The amount of coverage needed depends on the type of authority the adviser has over client funds/securities:
- Advisers with discretionary authority over funds totaling $25 million or less but do not have custody must post a $10,000 bond.
- Advisers with custody over funds totaling $25 million or less must post a bond of $25,000.
- Advisors with discretionary authority over funds totaling more than $25 million with or without custody need to post a bond between $25,000 and $100,000.
Pricing is subject to underwriting consideration, which means your premium is based on a review of your personal credit report. Request a free financial adviser quote now to find out your exact premium.
Why do I need this bond?
Kentucky investment adviser surety bonds ensure that principals (advisers) adhere to the provisions of Kentucky Revised Statutes Chapter 292, which is also known as the Kentucky Securities Act. Prohibited acts under this bond include, but are not limited to:
- Making untrue statements
- Entering into or renewing an investment contract without providing it in writing
- Assigning a part of an investment contract without the consent of the other parties
- Employing any scheme, artifice or device to defraud
- Engaging in any practice or act that classifies as fraudulent
If the principal violates these terms, the bond protects harmed parties from financial loss up to the full bond amount. Any claim paid out by the surety must be reimbursed by the principal.
For more information about investment advisory bonds in Kentucky, contact a surety expert now.
What’s the fine print?
Kentucky investment adviser bonds are effective for 1 year from the execution date unless canceled or violated. The surety can cancel the bond by giving 30 days’ written notice of cancellation to both the principal and the Commissioner of the Department of Financial Institutions.
All Kentucky bonds are subject to a 1.8% state surcharge.
How to become an investment adviser in Kentucky
To become legally licensed as an investment adviser in Kentucky, applicants must:
- Complete Form ADV, parts 1 and 2, and file them electronically through IARD.
- Submit the $100 filing fee.
- Submit a copy of client advisory contract(s). This should include:
the nature of services provided
the period of effectiveness
the advisory fee
the prepaid fee
whether the contract grants discretionary power to the adviser
a statement that the adviser will not assign the contract without written consent from the customer - Establish that the adviser is solvent.
- Obtain a surety bond in the proper amount.
- Submit a current financial statement, including a balance sheet.
